Health Care Reform: What’s Next for Small Business?

Employers are ramping up efforts to navigate health care reform and prepare for changes coming in 2014, with a flurry of activity following the U.S. Supreme Court decision in June 2012 that upheld key provisions of the Patient Protection and Affordable Care Act (PPACA). Provisions include the controversial individual mandate requiring most people to have health insurance or pay a penalty, new requirements for employers and insurance companies, and a number of patient protections designed to help Americans gain access to affordable health coverage.

Community rating: Beginning in 2014, small group plans will be community rated, which means insurers can’t underwrite based on individual health status. Premiums can vary based on number of person(s) covered, age, tobacco use and geographic location — with all small employers paying the same rate for the same plan within the community. This is intended to minimize price hikes that small groups experience when one worker has a major (costly) illness or injury; however, it also means that individual health improvements will not be reflected through premium discounts either.

Cap on deductibles: There will be a cap on the maximum deductible ($2,000 for single and $4,000 for family) beginning in 2014 for small group plans. Small employers offering high-deductible health plans with health savings accounts (HSAs), for example, will be subject to these new guidelines.

Health insurance exchanges: In 2014, state-regulated online marketplaces will allow individuals to compare and purchase coverage, with subsidies available based on income. Employer exchanges set up by the states will also be available for small businesses that meet certain criteria. In these exchanges, called Small Business Health Options Programs (SHOP), small businesses would join a larger pool of customers with a range of plan options.

Large employer mandate: Effective in 2014, businesses with 50 or more full-time equivalent employees (working 30+ hours a week) may face annual penalties per qualifying employee for not providing affordable coverage. The vast majority of large employers expect to continue providing health coverage to employees (only 3% plan to discontinue health plans for active employees in 2014 or 2015).* While the employer mandate does not directly affect small businesses, those who compete with larger companies for workers may be compelled to offer comparable health coverage and/or expand benefits eligibility to part-time workers.
Small business tax credits: Federal tax credits (available 2010-2014) reward eligible small employers for providing workers with health insurance. Visit irs.gov to learn more about eligibility.

Review your strategyThe decision to offer group health coverage for employees is complex — particularly for small businesses — and based on many factors, from company size and cost of coverage to employee retention and other long-term goals. Staying on top of the requirements for health care reform compliance may also be a challenge for small employers. Take time now to review your unique situation and strategy with a benefits consultant.

* Source: 17th Annual National Business Group on Health/Towers Watson Employer Survey on Purchasing Value in Health Care.

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